Costs When Importing from China: A Complete Guide

Calculating profit margins directly on a unit price is not a wise decision. When importing from China, there are many costs to take into consideration, and I’m not only referring to shipping and import duties. Buying products from Chinese manufacturers is much like flying with a budget airline. No extras included. You get what you pay for. They provide machinery, labor and (hopefully) manufacturing expertise. You provide the rest, including things that a buyer would normally take for granted.

Need a customized component or material substance analysis? That’s on you, not the supplier. Businesses importing from China must manage, or pay someone to manage, critical parts of the supply chain, including product development, quality inspections, tooling and laboratory testing. In this article we explain what costs you need to keep track of, when buying from Chinese suppliers.

#1: Tooling costs

Injection molds are used when manufacturing a wide range of consumer and industrial products. Chinese suppliers do keep molds in storage, often financed by previous buyers. When buying factory designed products, the buyer is usually not expected to pay for the injection mold. However, when manufacturing customized products, the buyer is expected to pay for the necessary tooling.

In many countries, the tooling cost is also part of the customs value, thus resulting in increased import duties and other taxes (e.g. VAT if you’re based in the European Union). If you’re on a small budget, stick to factory components whenever possible.

#2: Product samples

Buying wholesale products in China is rarely an option, especially for importers base in the United States, Canada, Europe and Australia. Instead, product samples serve as demonstrators of suppliers’ manufacturing capabilities. Many suppliers hand out factory samples for free, but custom designed and branded samples almost always comes at a cost.

But that’s not all. Different suppliers manufacture products of different quality standards, using different materials and components. At a minimum, you need to draft a product specification. If you plan to have a custom designed product manufactured, you need to create even more material, such as design drafts and prototypes. Never rely on a supplier to take care of product development for you.

What I just described was only for starters. After drafting a product specification and researching legal product requirements, you need to find reliable suppliers capable of manufacturing a product according to these. Keep in mind that the vast majority of manufacturers in China are NOT able to comply with foreign standards. That’s why many importing businesses choose to hire sourcing agents, rather than making a supplier selection on their own.

Nothing of this is free. The costs depend entirely on the complexity of your product, and how much of the procurement and product development process you are able, and have time, to manage on your own.

#4: Social Compliance Audits

Child Labor and horrible working conditions went out of fashion about a hundred years ago. In this time and age, consumers do care about social compliance. However, so far, social compliance is not part of any legal directive, such as CE or RoHS.

That being said, small businesses can improve their image and brand by showing that their suppliers are able to pass a social compliance audit. Retailers (potential buyers) care too, considering they are put under more media scrutiny than smaller businesses. What’s more, a social compliance audit is not expensive these days. The price is about the same as an iPad. It’s a very cost efficient brand investment, and I’ll think we’ll see more small to medium sized businesses using such services in the near future.

Cost: Starting from US$609 at Asiainspection.com

#5: Quality Inspections

By the time your cargo is shipped from China, you really need to be sure that the items are compliant with your product specifications and quality requirements. The only way to do that is by inspecting the items prior to the shipment. You can either do it yourself, or hire a quality inspector based in China. What you shouldn’t do, however, is to schedule quality inspections until after delivery. By then it’s already too late to send defective units back to the assembly lines.

A quality inspection is well worth the investment. Manufacturing is not a science. It’s not a matter of whether or not there will be defective and damaged units – that is certain. The question is how big a percentage, and how severe the defects will be. You can live with 1.8% of the units coming out of the assembly lines with minor cosmetic defects, but your business will go under if you receive a batch made of cheap, substandard and potentially toxic materials.

It happens. Sometimes quality issues occur due to misunderstandings between the buyer and supplier. Sometimes because the supplier decided to use cheap and substandard materials, without telling the buyer. A quality inspection is the only way to uncover noncompliance while there’s still time to do something about it.

Cost: Starting from US$299 at Sofeast.com

#6: Laboratory testing

While a quality inspector can test functions, check weight, dimensions other physical properties, he or she cannot analyze product chemical and substance content, while in the supplier’s factory (however, thanks to this recent development, substance analysis on the site is soon to become reality). In order to verify that your product is compliant with legal acts and directives regulating substances, such as REACH, RoHS and FHSA, a sample must be sent to a laboratory. In fact, third party testing is sometimes mandatory, especially when importing toys and other children’s products.

Cost: Starting from US$10 per component to several thousands of dollars, for more complex testing procedures. The laboratory fees are based on the number of different products and standards, each item is required to be in compliance with.

#7: Shipping costs

Getting your products from the factory floor to your warehouse involves a myriad of costs. Below follows a short list of shipping costs:

Shipping costs are based on Incoterms. This means that a supplier can quote a product, including freight to the port of loading in China, to the port of destination in your home country (with or without local port charges) or including delivery to a specific location in your country – for example your front door. Click here to read more about Incoterms when shipping from China.

Cost: Based on the cargo volume when shipping by sea, and both the weight and volume when delivered by air.

#8: Import Duties and Other Taxes

Imports from China are in most cases subject to import duties. Tariffs vary between different products and markets. So does also the customs value, of which customs duties and other taxes are calculated.

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Planning to Import Products From China?

Watch this video to learn more about the risks

About Fredrik Gronkvist

Fredrik Gronkvist has been based in Shanghai since 2010 and is our main contributor. In addition, his content has also been featured in Bloomberg, Quartz Magazine, Global Sources, Alibaba, China Chief Executive and more. You can send him an email on fredrik@chinaimportal.com or via Linkedin.

10 Responses to “Costs When Importing from China: A Complete Guide”

That’s a great overview! I had missed it. I am adding it to the list of good articles I found in July.
I didn’t know the tooling cost was to be included in the total product price to be declared to EU Customs. I guess many importers fail to respect this without even knowing it.

Glad to hear you liked it! Yes, it’s true that tooling costs are part of the declared value in the EU. The importer can either pay it all at once (one the the first import) or split it up over the course of many orders (using the same). However, if the buyer would not reach the maximum number of units that can be made by a mold, or other tooling, they need to pay the final VAT and import duties on the last import. Thus, it’s not possible to get around this.

However, sourcing, quality inspections, and other related services, are not part of the customs value. But only under the condition that the agent / consultant / inspector is selected by the importer (e.g. not a sales representative of a supplier).

Great post Frederik. Thanks for that. I have a question: Have you ever encountred cases where the final customer asks for the mold to be shipped to him with the last order delivery? Since he’s paid for it, he can claim property over it.

After a lot of online search, I have found your company to be the best in helping startups with getting information about production and supply in China. I have a startup in US and Nepal and we are trying to find a custom manufacturer in China for our designed Chair. It has been difficult to find a manufacturer who can take a design and make the product, since everyone makes their certain chairs. How can we find such custom manufacturers? What shipping companies are good enough to ship product to Nepal?
Thanks.

I am planning to buy some goods from China (via DHgate.com) with several companies who use various couriers, DHL, Chinaairpost etc
Do I need to do anything after placing my order or do I just wait for someone to contact me via post/phone to pay the neccessary fees..?
thanks

When we are planning to come up with some new products, we need to take the shipping cost into accunt. But how to estimate the cost to get all the products to your door? As per my experience in China custom plastic injection molding industry for more than 6 years, below are some guidelines:
1, Carton size: If no samples or prototypes at the beginning, you can estimate the packaging arrangement as per the 3d drawings. Say the general dimensions of the parts is about: 11.2cmx4.3cmx6CM, how many rows, say 5 and how many pcs per row, say 6, then 30pcs per layer, and how many layers is good as per the height, say 6 layers, then 30×6=180pcs per carton. Then calculate the general dimensions of the carton: 11.2×5=56CM, but as there must be gap between, say totally about 2CM, and to add the thickness of 1CM of the carton each side, 2CM for the carton thickness. To add up: 56cm part size+2cm gap+2cm carton thickness, then 56+2+2=60CM, this is the length of the carton. In the same way, 4.3×6+2+2=29.8CM about 30CM, this is the width of the carton. For the height: 6CMx6 layers=36cm for the parts, but the gap between is usually bigger than length and width side, say about 4CM, 2CM for the carton thickness, then to add up: 6×6+4+2=42CM. Then the estimated carton size is: 60x30x42CM.
2, Gross weight per carton It is easier. You can ask the manufacturer to get the estimated unit net weight of the parts. They can weigh the weight by software with basic calculation. Volume x density of the plastic type=weight. Say the unit weight is about 80grams. Then 180pcs per carton, so 0.08×180=14.4KGS for the parts. As per our experience, unit weight of the carton itself is about 1KGS for a 5-layer corrugated carton with medium size like 60x30x42CM. So the gross weight per carton is: 15.4KGS/Carton.
3, Light goods or heavy goods? Light goods: the actual weight is smaller than the carton size(in unit: meter) x167(actully 166.6) Heavy goods: the actual weight is bigger than the carton size(in unit: meter) x167(actully 166.6) The Criteria is: If they are light goods, the shipping company charge as per the volume(the carton size(in unit: meter) x167(actully 166.6); if they are heavy goods, the shipping company charge as per the actual weight.
Because in this way, no matter what kinds of goods, the shipping company can charge the most. Say, cotton is so light, but it takes too much space. If just to ship the cotton, but charge as per the actual weight, where is the profits for the shipping company?
If the carton size is 60x30x42M, the actual final weight is 15.4KGS just like our estimation: 0.6×0.3×0.42×167=about 12.6KGS, then the shipping company will charge as per 15.4KGS But if the carton size is 60x30x42M, the actual final weight is 11.5KGS (that means the estimated weight is not precised): 0.6×0.3×0.42×167=about 12.6KGS, then the shipping company will charge as per 12.6KGS
4, To door or To sea port? Usually, if to ship by air or by sea, the forwarder would ask you how you want the goods be delivered? To door? or just to the sea port, and then you can arrange the pick-up by yourself at the sea port. So it is important to tell the forwarder where you want to ship, the detailed address if To door, the destination sea port if just to sea port.
Above is just to estimate the shipping cost/(ocean freight if by sea), but for import, there are also some other charges, like documents fee(D/O), AMS, ISF(if ship to USA), Customs clearance,etc.